The Economist: A guide to womenomics

An Economist article on women and the world economy argues that "the future of the world economy lies increasingly in female hands". The piece, A guide to womenomics, claims that:

In rich countries, girls now do better at school than boys, more women are getting university degrees than men are and females are filling most new jobs. Arguably, women are now the most powerful engine of global growth.

The article gives particular attention to the growing role of women at work. The most interesting chart highlights the positive correlation between women's fertility rate and their labour force participation:

It is sometimes argued that it is shortsighted to get more women into paid employment. The more women go out to work, it is said, the fewer children there will be and the lower growth will be in the long run. Yet the facts suggest otherwise. Chart 3 shows that countries with high female labour participation rates, such as Sweden, tend to have higher fertility rates than Germany, Italy and Japan, where fewer women work. Indeed, the decline in fertility has been greatest in several countries where female employment is low.

It seems that if higher female labour participation is supported by the right policies, it need not reduce fertility. To make full use of their national pools of female talent, governments need to remove obstacles that make it hard for women to combine work with having children. This may mean offering parental leave and child care, allowing more flexible working hours, and reforming tax and social-security systems that create disincentives for women to work.

Countries in which more women have stayed at home, namely Germany, Japan and Italy, offer less support for working mothers. This means that fewer women take or look for jobs; but it also means lower birth rates because women postpone childbearing. Japan, for example, offers little support for working mothers: only 13% of children under three attend day-care centres, compared with 54% in America and 34% in Britain.

The whole article is free online.

Comments

[knzn]

This is a really cool counterintuitive result. Right up there with, “Growth increases unemployment in developing countries.”

Somehow we assume initially that women’s preferences will be the driving variable. So countries where women prefer to work will have lower fertility rates. But apparently, women’s preferences don’t vary a whole lot from one country to another: everywhere, they want to have both jobs and children, if they can get both. So the driving variable is not preferences but the budget constraint. Where fertility is expensive in terms of foregone work, most women can’t afford both, so the quantity demanded of each (children and jobs) is low. (If they were mutually exclusive, for example, the percent of women who work and the percent who have children would have to add up to a maximum of 100.) Where fertility is cheap in terms of foregone work, most women can afford both, so the quantity demanded of each is high. (For example, the percent who work and the percent who have children could add up to as much as 200.)

Of course, I wouldn’t be at all surprised to find that countries with a lot of cars also have a lot of personal computers. It would be silly to think, “In some countries people prefer to spend their money on cars, while in others they prefer to spend their money on computers.” Rather, in the rich countries, they have both; in the poor countries, they have neither. So why, in the case of fertility and work, do we assume initially that the budget constraints are the same while the preferences differ?

[David]

Could it also be that demographics is driving the correlation? Ie, countries with higher proportion of working-age women also have a higher proportion of child-bearing age women? It just represents a younger population?

[Arthur Eckart]

I would have liked to see the model to know what variables are included or excluded. There are many important variables that should be included, e.g. the positive correlation of education and income, how many hours define employment, subsidized child care, wage differences (e.g. opportunity costs), etc. Having two children may not affect employment. However, more children may create a threshold effect causing the female to quit her job. The article states "there's a positive correlation between women's fertility rate and their labor force participation." However, the evidence in the article is scant. The article does cite other influencial factors are at work. Below is a link that shows the poorest countries have the highest fertility rates:

http://www.cia.gov/cia/publications/factbook/rankorder/2127rank.html

[Arthur Eckart]

Knzn, you analogy of cars and computers with jobs and children isn't correct. Studies show when women's wages rise, they have fewer children, because the opportunity cost of having children rises. One reason poor countries have high fertility rates is women are underpaid.

[knzn]

Arthur, I think you misunderstood my analogy. I’m seeing the tradeoff between jobs and children as an isolated decision, not as a reflection of overall wealth. The countries in this study are all fairly rich, so the driving factor is not going to be the contrast between rich and poor countries. I would have expected social preferences for work vs. children to be the driving factor. Rather the driving factor seems to be whether women have the opportunity to do both, just as the driving factor in buying cars and computers is whether people have the opportunity to buy both. The analogy is just an analogy, A:B::C:D; don’t assume that A and B have anything directly to do with C and D.

[Arthur Eckart]

Knzn, income is a very important determinant in fertility rates, whether it's between rich and poor countries or between high income and low income women in rich countries. The data show lower income women have more children, because their opportunity costs of having children are lower than high income women. So, your analogy of cars and computers with jobs and children is incorrect (e.g. the number of cars and computers you purchase has no effect on your job or income). I stated above it seems to be a poor study, because it only includes a few rich countries and seems to exclude some important variables. Also, I agree (and stated above) there may be a threshold effect, i.e. employment doesn't affect women with two or fewer children. However, the positive slope of a few selected countries in the study may indicate women with children receive greater benefits from the job market than women without children (which rich countries with a negative replacement fertility rate can afford).

[New Economist]

Guys, I think you have misunderstood what the Economist chart shows. Of course poorer countries have higher fertility rates, as Knzn says. But the chart is of OECD countries only.

And of course higher paid, better educated women in OECD countries tend to have fewer children than do lower paid women, because the opportunity cost is higher, as Arthur says.

The point of the above chart, however, is to show that within OECD countries, fertility need not be incompatible with women working. It is an interesting, counter-intuitive result - which is why I highlighted it.

The two main mechanisms at work here, I think, are that as the proportion of women of child bearing years in the workforce grows:

1) So too does the supply of formal childcare places, either by government or the private sector; and

2) The more likely governments are to respond to working women's calls for assistance with childcare costs, maternity leave and pay, flexible working arrangements, child tax credits and the like. These policies act to lower the opportunity cost of having children and to make it more feasible to combine work and being a parent.

So it's changes to both supply and demand that are having this effect.

[JonasParker]

Hi. I just found that Womenomics article, but it is no longer available for viewing. Would you have saved the article, or know where else I might find it online?

[Lafayette]

"Rather, in the rich countries, they have both; in the poor countries, they have neither. "

Both Italy and Spain are rich countries with low fertility rates.

So, your comment should read "can have both, if they chose to do so". The question then becomes, why do the Italian/Spanish women decided not to have children and the French/US opt to have them?

It is not economic, but cultural and it seems to vary from country to country.

Neither can one blame low fertility on unemployment. France and Italy have similar unemployment rates but different female fertility.

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